Investment Management: Closed-End and Interval Funds

Practice flashcards covering the characteristics, pricing, and regulatory structures of closed-end management companies and interval funds.

Closed-end management companies

Investment companies that pool investor money and invest it according to stated objectives, where shares trade between investors in the secondary market rather than directly with the issuer.

Capitalization

The method by which a corporation structures its capital, consisting of equity/stock, debt, and retained earnings.

Prospectus rule

A regulation requiring that every purchaser during an Initial Public Offering (IPO) must receive a prospectus containing detailed information about the issuer and the security.

Negotiable securities

Securities, such as closed-end fund shares, that can be traded in the secondary market and typically have a fixed number of shares outstanding.

Commissions

The transaction costs paid by investors when buying or selling closed-end fund shares in the secondary market, distinct from mutual fund sales charges.

Net Asset Value (NAV)

A calculation reflecting the value of assets held in a portfolio; for closed-end funds, it acts as a "book value" reference point while the market sets the actual trading price.

Interval funds

A unique type of investment company legally structured as a closed-end management company that does not trade in the secondary market and instead sells shares directly to investors at NAV.

Repurchase offer

An offer made by an interval fund at specific time intervals to buy back shares from liquidating investors.

Pro-rata basis

The method used by interval funds to allocate redemptions if investors request to liquidate more shares than the fund is willing to repurchase during a specific period.

Liquidity risk

A risk associated with interval funds because investors generally cannot liquidate their shares outside of specific, predetermined redemption windows.

Redemption fees

Fees charged by interval funds for repurchasing shares, which regulations limit to a maximum of $2\%$.